Africa’s biggest bank, Standard Bank is optimistic Ghana will finalise an external debt restructuring deal in the second half of the year.

Ghana agreed to terms with its bilateral creditors in January 2024 but is yet to come to terms with its commercial creditors or bondholders. The Ministry of Finance had already revealed that the Official Creditor Committee deal would eventually influence the terms of the final bondholder deal.

In its 2024 Economic Outlook, the Johannesburg based lender said while the government can reach separate agreements with official creditors and bondholders, the most crucial aspect of the common market framework will be for both of the creditor groups to be on the same page and for the proposals to be aligned with the International Monetary Fund (IMF) programme debt sustainability parameters and comparability of treatment principles. It took into consideration the recent case study of Zambia’s external debt negotiations.

Zambia is undertaking a debt restructuring programme, but it is yet to reach an agreement with its external bondholders.

“Indeed, it is natural to expect both creditor groups to seek their pound of flesh in these negotiations but, if an agreement between the OCC and bondholders is not secured in 2024, it will be a huge blow to the common market framework and perhaps may dissuade other economies from contemplating external debt defaults in the absence of a better solution. Official creditors broadly believe that bondholders already benefited from not participating in the 2021 Debt Service Suspension Initiative (DSSI)”, it stated.

“However, Ghana can still save face for the common market framework. The government reached a deal with the OCC in early January 2023, which unlocked the $600 million second disbursement under the IMF programme and, at the time of writing, had subsequent meetings lined up in Europe to advance debt restructuring negotiations with bondholders. The Ministry of Finance is confident that a deal with bondholders can be reached by the end of Q1:24 [quarter one 2024]”, it added.

It continued that the main issue of contention in the OCC talks initially was the cut-off date, for which loans disbursed after this date, won’t be eligible for debt restructuring.

“Although, they finally agreed to December 2022 rather than March 2020, the Ministry of Finance confirmed that the deal with the OCC has a moratorium on debt repayments in place through to 2026. Further, they confirmed that debt service for 2023 and 2024 for bilateral debt will now be extended by 17 years, repayable in two tranches”, it mentioned.